The profit of a monopolist can be eliminated where price equals?

A. AFC
B. MC
C. AC
D. AVC

Correct Answer:

Option B – MC

Explanation

Monopolies make profits by creating prices that are higher, and output that is lower. Profits would be eliminated when price is equal to marginal cost. That is the cost incurred by a firm by producing one additional unit of a product or service. The monopoly would no longer make profits if the price it charges for its product is equal to the additional cost it incurred in producing that good.